Why restaurants should embrace mobile payment with iPhone 6 and PassBook
By Bijan Shahrokhi, CEO of Virtual Next Inc.
Earlier this week, Apple announced their mobile payment capability alongside its featured iPhone 6. Why is this significant?
"...that will allow consumers to make purchases using just their phones or watches, marking the company's first big push into brick-and-mortar payments. Apple said it hopes to speed up the checkout process, make credit-card payments more secure and ultimately, to replace physical wallets."
Integration of Near-field Communications (NFC) into the iPhone 6 plus Passbook creates a much stronger value proposition for PassBook, not only for consumers, but also for restaurants and retailers.
This rumor has persisted for years in anticipation of each iPhone release. However, until recently, leaked schematics of the iPhone 6, plus rumors that Apple has been working with American Express, continue to validate this. The future of payments is indeed mobile. As this article suggests, global users are increasingly adopting the idea of electronic payments being the most secure, in particular:
- 24 percent for shoppers with ages between 16-24;
- 25 percent for shoppers between 25-34 as well as for those aged 35-44.
- For the age group 45+, it does drop, but only to 20 percent.
This percentage will continue to grow as the younger demographics between 16-34 mature and become the largest consumption base.
#ApplePay: The payment service is here
The announcement of #ApplePay revealed ability to store cards from major credit card networks: VISA, MasterCard, American Express. Apple will also begin working with retailers like Bloomingdales, Macy's, McDonald's, Wholefoods, Disney and Staples. While there has been speculation about NFC functionality being built into future iPhone releases, Apple has, until recently, been largely non-committal in adopting NFC. Its counterparts, Blackberry, Android and Windows Phone, on the other hand, have had NFC for some years now. Apple's progress has been slower as it launched Passbook in 2012 that enabled a catch-all for a user's loyalty cards, coupons, and event tickets on the iPhone.
We have also believed that Passbook would become significant in the mobile wallet arena. To date, what Apple has been promoting is its iBeacon capability – a combined Blue-tooth and Wifi for short range wireless. Apple's interest in prioritizing iBeacon over NFC was to augment the limited security of NFC. Now by combining NFC with finger touch recognition technology TouchID, Apple is able to offer NFC payment in a secure manner inside PassBook, making PassBook more relevant than ever to the restaurant and retailers.
The New Passbook has exciting opportunities for restaurants:
- Merchants do not need their own apps to accept mobile payment. The PassBook is your digital wallet. Google is also following Apple’s direction with their Google Wallet app. So is Windows. We have understood the abundance of branded mobile apps and the low activation and usage rates that result.
- VISA recently announced its support for the iPhone 6 with their new Token Service, which essentially replaces credit card information with a digital account number. This eliminates the need for credit card information to be stored within the phone itself.
- You can only pay with your mobile phone if the phone recognizes with their TouchID technology that you are the owner of the card.
- Combining NFC Technology with VISA Token Service and TouchID eliminates fraudulent activities and makes mobile payments much more secure.
- This will inherently mean mobile payment adoption will speed up at a much higher rate than before.
Mobile payments: A significant market shift?
The announcement sends a clear signal to the marketplace. All iPhones will now have mobile payment capabililty. The credit card networks and the retailers are jumping on board. It's pretty clear the PassBook capabilities may be enough to set Apple apart from the competition. Will this be the standard that makes PassBook a more sustainable technology? Regardless, the market is responding in a positive way.
Apple's involvement has been viewed in this way: So far, the uptick in mobile payments using near field communications has been disappointing despite the involvement of Google Wallet. Research firm Gartner estimates that NFC will only account for about 5 percent of all mobile payments in 2017. But Apple Pay could be "an enabler..."
From the standpoint of the customer, pervasiveness of NFC across all smartphones will begin to change behavior across the industry. We'll see increased sale of NFC-enabled terminals at POS and an increase in adoption of iPhone PassBook.
It's exciting to see that Apple has incorporated finger print authentication to PassBook. From this perspective, customer experience will need modifications to accommodate faster payment. This is going to be paramount for QSRs to remaining nimble with the technology.
Bijan Shahrokhi is the CEO of Virtual Next Inc., a provider of digital store cards that work with digital wallets for restaurant chains and retailers.